Call Us! 800.678.1614

facebook linkedin twitter facebook

The Economy is On Fire: A Roundup of Recent News

The Economy is on Fire: A Roundup of Recent News

THE ECONOMY IS ON FIRE: A ROUNDUP OF RECENT NEWS

The final days of July included a lot of big news for the economy, including a few developments that are particularly relevant to trucking. Our industry is, of course, inextricably tied to the country’s economic health. But we can also tip the scales in one direction or another, something that we’ve seen during the second quarter of 2021. So without further ado, we’d like to call out a few economic indicators that are particularly relevant to trucking right now.

First up, we’ve got GDP, or gross domestic product. The first measure of second quarter economic growth came in at a 6.5% annual rate. This was well below what Wall Street had in mind (most surveys predicted a rise of more than 8%), but good enough to grow the economy above its pre-Covid level.

Within the report, personal expenditures rose by 11.8%, accounting for 69% of total economic activity. At the same time, personal savings shrank by over 50%. This is important to keep in mind – what it tells us is that consumers are spending their money, confidently, and that will continue to put pressure on the trucking sector.

Also worth noting – economic growth over the second quarter appears to have been reigned in by lack of logistics capacity. Several economists have noted that were it not for supply chain SNAFUs, GDP gains could have been percentage points higher.

With this type of economic news, perhaps it shouldn’t be a surprise that orders of all stripes keep rising. New orders for core capital goods advanced 0.5% in June, the latest data available. Durable goods (any item meant to last at least three years) jumped by 0.8%. Non-durable goods rose by an even more dramatic 2.1%. The only constraint seems to be the ability to fulfill all these orders. Unfilled orders rose by 0.9% during the same time period.

Which brings us to the latest Federal Reserve meeting. On July 28th, the Fed announced that it won’t raise interest rates (which are hovering close to zero) or change the pace at which it buys government bonds. Instead, Fed chair Jerome Powell argued that the U.S. is a ways away from stabilizing prices and reaching optimal employment, two of the organizations’ goals. As it stands, it’s looking like we won’t see a rate hike until at least mid-2022.

Monetary policy can get a little dense, but the big takeaway here is that freewheeling spending is likely to continue, and that will keep prices heading upwards. As far as your drivers are concerned, there’s going to be more of a need for them than ever, but they are likely to feel the pinch as life on the road becomes more expensive.

To summarize, the economy keeps heating up, magnifying the double-edged sword that we tend to encounter in this industry. On one hand, the demand for trucking services will likely continue to defy the laws of gravity. On the other, the competition for drivers (from other fleets and other industries) is going to be especially fierce.

Share this post
  , , , ,